Budget 2025 may offer Tax GST rebate & other incentives to housing

The upcoming Union Budget 2025, scheduled for presentation by Finance Minister Nirmala Sitharaman on February 1, 2025, has sparked considerable anticipation within the real estate sector. Industry leaders are advocating for a suite of tax incentives aimed at enhancing the affordability of housing in India. Key proposals include exempting the Goods and Services Tax (GST) on joint venture agreements, which would streamline transactions and alleviate financial burdens on developers. Additionally, stakeholders are calling for a reduction in GST rates on essential construction materials such as steel and cement, which they argue are critical to lowering input costs.

As part of their push for reform, industry representatives are also advocating for an increase in the home loan tax deduction limit and the reinstatement of input tax credits under GST. These measures, they believe, would not only stimulate homeownership but also bolster liquidity in the market. Prominent voices in the industry, such as Pramod Khairnar Patil from CREDAI Maharashtra, have highlighted the importance of reviving Section 80-IBA benefits, which grant a 100% tax exemption on profits from affordable housing projects.

The call for a reassessment of the definitions surrounding affordable housing is also gaining traction. Suggested changes include raising the price cap for affordable housing from Rs 45 lakh to Rs 80 lakh to align with current market realities. With such reforms, real estate professionals believe that the government can create a more conducive environment for investment and homeownership across India.

Key Demands from the Real Estate Sector

Industry leaders have united to articulate their demands for the upcoming budget, focusing on several key areas that they believe will positively impact the affordable housing landscape. One of the most pressing concerns is the need for a comprehensive review of the GST framework, particularly the tax rates applied to essential construction materials. As stated by Arun Shukla from JK Lakshmi Cement, reducing the GST on cement from 28% to 18% could significantly lower construction costs, thereby making housing more accessible to the average Indian family.

Moreover, the proposal to raise the home loan tax deduction limit under Section 24(b) from Rs 2 lakh to Rs 5 lakh is gaining support among real estate developers. This increase is seen as a crucial step towards making housing more affordable and encouraging more individuals to enter the housing market. The calls for reinstating input tax credits under the GST regime are also noteworthy, as they would provide much-needed financial relief to developers and, in turn, consumers.

In addition to tax incentives, there is a growing emphasis on the need for an expedited approval process for housing projects. Stakeholders are urging the government to streamline project approvals and release funds promptly, which would enhance the overall efficiency of the sector. As highlighted by Anshul Singhal from Welspun One, fostering public-private partnerships for innovative construction solutions can further ensure that housing remains sustainable and affordable.

Long-term Implications for the Real Estate Industry

The proposed changes in Budget 2025 have the potential to reshape the Indian real estate landscape significantly. By increasing tax incentives and redefining the parameters of affordable housing, the government could stimulate a surge in home ownership, particularly among first-time buyers and economically weaker sections of society. The shift in policy could also attract Foreign Direct Investment (FDI) into the sector, further enhancing its growth potential.

As Nitesh Kumar from Emami Realty points out, raising the price cap for affordable housing and extending home loan tax benefits could improve accessibility and affordability for many families. The introduction of financial incentives for sustainable building practices, as suggested by Rakesh Reddy from Aparna Constructions, aligns the real estate sector with India’s climate goals while fostering innovation.

In conclusion, the expectations surrounding the upcoming Union Budget are significant. Industry stakeholders are keenly awaiting measures that can enhance affordability, streamline processes, and promote sustainable development. The realization of these demands could mark a transformative moment for the Indian real estate sector, paving the way for a more inclusive housing market.

  • Increased tax incentives for affordable housing are anticipated.
  • Industry leaders demand a review of GST on construction materials.
  • Calls for raising home loan tax deduction limits are gaining traction.
  • Streamlined project approvals could enhance sector efficiency.
  • Financial incentives for sustainable building practices are necessary.
  • Revised definitions of affordable housing are crucial for market alignment.
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